Summary
Iran’s central bank is pushing ahead with a “Digital Rial” CBDC pilot framed as a modernization project to improve payments, inclusion, and anti-crime enforcement. Strategically, it serves two linked goals: convincing the FATF that Iran can deliver high financial traceability to help exit the blacklist, and expanding state power over domestic money flows.
Built on a permissioned, centrally controlled ledger, the currency would enable fine-grained tracking of transactions, easier tax collection, and stronger AML/CTF monitoring. Those same features also create a system of pervasive financial surveillance, allowing rapid identification of dissident funding, instant account freezes, tougher barriers to capital flight, and tighter pressure on the informal economy.
In practice, the project blends an external bid for financial legitimacy with an internal upgrade of authoritarian control.
The Central Bank of Iran (CBI) is actively advancing the development and pilot launch of its Central Bank Digital Currency (CBDC), often referred to as the “Digital Rial” or Ramzrial. On the surface, the CBI presents this project through the universally accepted language of modern financial governance: a tool essential for modernizing the national payment system, enhancing financial inclusion, and rigorously combating financial crime, specifically money laundering (AML), terrorist financing (CTF), and tax evasion.
However, beneath the veneer of technical necessity and economic modernization lies a stark geopolitical and domestic reality. The Digital Rial serves two critical, interconnected purposes: a high-stakes demonstration of compliance to the Financial Action Task Force (FATF) to escape its detrimental blacklist, and a powerful new instrument for the Iranian regime to impose unprecedented levels of state control and surveillance over the financial lives of its citizens.
For years, Iran has been one of only a handful of nations on the FATF’s dreaded global blacklist, the “High-Risk Jurisdictions Subject to a Call for Action.” This designation effectively isolates Iranian banks from the international financial system, choking off foreign trade and investment by forcing global financial institutions to apply “enhanced due diligence” and, in many cases, countermeasures. To re-engage with the global economy, Iran must demonstrate a credible commitment to a robust Anti-Money Laundering and Counter-Financing of Terrorism regime.
The Digital Rial is a tangible, technologically advanced answer to the FATF’s demands for greater financial transparency and traceability. The CBI has explicitly noted that its CBDC is being designed to be “easy to track” and to tackle tax evasion and money laundering. Unlike physical cash, which offers anonymity and facilitates black-market activities, the Digital Rial is a liability on the central bank’s ledger. It is programmable, registered on a private, permissioned distributed ledger technology (DLT) platform reportedly the Borna platform using Hyperledger Fabric which means the CBI, and by extension, the state, controls the keys, the ledger, and the access points.
This digital infrastructure allows for the immediate, granular tracking of every single unit of currency, from issuance to final consumption. In theory, this provides the transparency the FATF demands. It allows the Iranian Financial Intelligence Unit (FIU) to track all large transactions, verify the origin and destination of funds to detect criminal networks and money-laundering schemes, identify individuals engaging in previously unrecorded cash transactions, thereby eliminating a major avenue for tax evasion.
By launching a technically sophisticated, fully traceable national currency, the CBI sends a clear signal to the international community, Iran is serious about its AML/CFT obligations. The CBDC, therefore, is not merely a monetary project; it is a geopolitical utility intended to secure the removal of the FATF blacklist label, which has become a significant choke point on the economy, even as the regime simultaneously engineers other, less transparent schemes to bypass sanctions via regional trade.
While the official narrative focuses on AML/CTF, the same features that make the Digital Rial attractive to the FATF are precisely what empower the regime to solidify its domestic control. A fully traceable CBDC offers the government a powerful new tool to monitor, manage, and potentially manipulate the financial behaviour of every citizen.
The shift from anonymous physical cash to a fully traceable Digital Rial represents the creation of a financial panopticon. Every transaction, every purchase, and every transfer becomes a permanent, timestamped data point accessible by the state. This level of surveillance extends far beyond typical law enforcement interests and penetrates the private, economic sphere of citizens of political monitoring: The ability to instantly identify and trace the funding streams of any internal dissent, protest organization, or opposition movement is invaluable. In a climate where authorities have historically targeted the financial networks of perceived enemies, a CBDC allows for the immediate “digital freezing” of assets based on political rather than purely financial pretexts. In addition fiscal and capital control, in a sense that the regime faces a crippling crisis of capital flight, where citizens rush to convert their Rials into US dollars, gold, or decentralized cryptocurrencies to protect their wealth from hyperinflation. The Digital Rial is designed to be a closed-loop system, making it more difficult to transfer wealth out of the country. Furthermore, the CBI can potentially enforce currency restrictions such as limiting the amount of CBDC a person can hold or transaction a way that is impossible with paper currency. Targeting the underground economy, which can be viewed as reducing tax evasion as a legitimate goal in an economy riddled with patronage and corruption, the tracing capability of the CBDC is most effective against small and medium sized businesses and ordinary citizens. It enables the state to cast a dragnet over the entire populace, extracting revenue more efficiently and tightening its grip on the informal economy, often an economic lifeline for those outside state-controlled enterprises.
A 2022 report highlighted that the Iranian Ministry of Intelligence had a hand in the design of the Digital Rial, underscoring the deep integration of security and surveillance objectives into the currency’s core architecture. Furthermore, the CBI’s decision to ban decentralized cryptocurrencies while promoting its own centralized token reinforces the ultimate objective: eliminating any financial activity that operates outside of the state’s unblinking digital eye.
The irony of a state like Iran which has been sanctioned for using its financial system to fund activities the West deems illicit adopting a currency based on the principle of absolute traceability cannot be overstated. While the CBI has acknowledged privacy concerns, suggesting it is looking for an “optimal point” between anonymity and traceability, the technical design of a permissioned DLT, managed solely by the central bank, indicates a clear prioritization of state visibility over citizen privacy.
In the context of an authoritarian regime, this is not merely a trade-off but a calculated consolidation of power. The Digital Rial transitions the financial landscape from one where transactions can occasionally be tracked to one where they are always monitored, always recorded, and always subject to state intervention. It transforms the national currency from a simple medium of exchange into a powerful data-collection and enforcement mechanism, cementing the regime’s control over the economic freedoms and, by extension, the political activities of its populace.
In conclusion, the Central Bank of Iran’s pursuit of the Digital Rial is a sophisticated, multi-layered strategy. It is both a desperate plea to the FATF for a return to global financial legitimacy and a deliberate technological upgrade to the regime’s apparatus of domestic control. By cloaking surveillance capabilities in the language of AML/CTF compliance, the CBI attempts to secure international acceptance while simultaneously building the ultimate financial ledger for total state oversight.
